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| 2008/8/12-18 [Finance/CC, Finance/Investment] UID:50852 Activity:high |
8/11 Our Phony Economy
http://harpers.org/archive/2008/06/0082042
\_ This is an outstanding article. My hope for Obama is that
he could become the first serious politician on either side
of the aisle to challenge the assumption that GDP growth shoulds
of the aisle to challenge the assumption that GDP growth should
be our primary metric of success. -tom
\_ Success is how many countries we can free from TYRANTS
and AXIS OF EVIL in this world.
\_ Given the success of a $ measurement of "the economy", perhaps
the fix is to provide $ values for the things that have been
left out? Estimates of the value of "health", "environment"
and "resources"?
\_ This article doesn't mention any concepts not taught in Econ 1.
Every economist knows these things. I'm not sure what's so
great about the article or how it really addresses what's
wrong with measuring the growth of the economy via GDP. An
$800 pair of shoes *does* contribute 40x more to the economy
than a $20 pair of shoes.
\_ Proving you don't know what you are talking about. If I buy
an 800 dollar pair of shoes and wear them once or twice
less is added to the economy then if 40 people buy 20 dollar
shoes and use them to be more productive as people with shoes
can contribute more to the economy than people without shoes,
they can walk longer distances, are less likely to hurt
themselves, etc etc. Big luxury items don't create as much
wealth as a simaler level of basic needs. That's not to say
they don't contribute ANYTHING.
\_ You have it BACKWARDS. It's called Demand and
Supply (or it should have been). How are you going
to make those other people buy the 40 pairs of
shoes because you've given up the $800 pair?
People make their own decisions about what to buy,
which leads to demand, which is fulfilled by
supply. Now if you think 40 x $20 shoes >> $800,
then you let us know when you come up with a new
mathematical model that is internally consistent,
which somehow awards bonus dollars for having been
bought by the noble and now magically more
productive. Also, do you think people buy a $20
pair of shoes and then say, oh, I can be so much
more productive now. No, poor people without shoes
with an entrepreneurial bent decide to take a
chance and make some money, then realize they can
be more productive with shoes, and so buy a
pair. The whole theory is backwards.
\_ Why are you assuming people are attacking capatalism?
Noone is trying to say people shouldn't buy luxuries.
People are saying when the economy becomes too geared
towards buying and selling luxuries that do not
generate work in and of themselves that an economy
suffers, even if the GDP is still going up.
\_ This doesn't make sense. Nothing generates work in
and of themselves. "Real GDP" going up means there
is more overall value in the country, regardless of
what it was. The market is better at deciding value
than you are. A real problem that is mentioned in
the article is when "commons" damage is not accounted
for.
\_ Please provide some proof that the market is
"better at deciding value than you are." That's
merely an assertion. -tom
\_ America = free market, the strongest nation
in the world. You're an idiot. Go back to
Russia.
\_ America = democracy, the largst government
in the world, therefore the most central
control of spending. I see you are totally
incapable of arguing your point. -tom
\_ Well, is it just a coincidence that market-
based economies outperform planned economies?
Were those planned economies just unfortunately
saddled with the wrong planners?
But let me put it another way: it's not so
important that the market is better at it.
It's that *I* am better at deciding what's
valuable *to me* than you are. And when we
all do that it's called a market.
\_ Is Bernake a market planner? There
are aspects of planning in all
Western countries, and aspects of
market economies in Cuba and China.
Are we outperforming China right
now? By what metric? It has already
\_ China mysteriously has been doing
*far* better since they reformed their
system to incorporate market principles
beginning in 1978.
Chinese people are the biggest fans of
the free market in the world.
http://preview.tinyurl.com/bgprg
been proven that groups of individuals
making "rational" decisions for them as
individuals can produce negative results
for the entire system. And the use of
GDP as a proxy for success has problems
well beyond the problems of the commons
or of incomplete information; the use of
GDP as a proxy for success places a value
judgement on monetary transactions--
monetary transactions are inherently
more valuable than non-monetary
transactions. Buying food is valued more
highly than growing your own. Paying
$1000 for a cat is valued more highly
than adopting a stray. It is clear that
dialog and politics in the US are
beholden to these values, but it is not
at all clear that they produce good results
for the society. -tom
\_ If you have $1000 and you adopt a
stray cat then you have $1000 to
spend on something else. The $1000
doesn't go away unless you stuff it
in your mattress.
\_ All economies are planned, to a certain
extent. The best performing economies over
the long run are mixed economies, apparently
ones with a bit more central planning than
in the US. See Sweden vs. US long term median
per capita salary growth. Even in per capita
GDP they pretty much equal us, with a more
evenly distributed income structure and
less income volatility.
\_ Sweden and the US still have roughly
similar economic structures: market
based democracy plus socialist programs.
Sweden and the US have too many other
differences... the US gets huge numbers
of poor immigrants.
\_ I don't really disagree, but then again
the Democrats and Republicans don't
really disagree either. What's 30% vs.
40% state control of the economy?
Mostly, a tempest in a teapot, but
listening to FOX NEWS, you would think
it was the difference between liberty
and slavery.
\_ Who says what's more productive? That's USSR mentality.
If someone wants $800 shoes, why not? The money doesn't
disappear: the shoe makers profit and buy stuff from
others etc. and people are happier. That guy had to first
come up with the $800 somewhere too, probably doing
something productive somewhere in that chain.
\_ Do you have a problem with reading comprehension?
Noone said you shouldn't be able to buy 800 dollar
shoes. But 800 dollar shoes do not help the economy
as much as 40 $20 shoes, assuming 40 $20 shoes are used
in the manner most people use them. Just like buying
a 500k supercar doesn't help as much 30 people buying
middle of the road vehicles that let them be more
productive. If you don't understand that you have
no bussiness saying the article writer doesn't know
what they are talking about.
\_ Can you prove that people are happier because they have
$800 shoes? Because all the attempts to measure how
happy people are have found little or no correlation
between the number of luxury items someone has and
their level of happiness. America has gotten
ridiculously wealthy in the past 60 years and has
not gotten any happier. I think discussing what is
or isn't more "productive" is totally missing the point;
the purpose of our country isn't to produce as much
as it possibly can, the purpose is to promote the
general welfare of the people. The assumption built
into much of our discussion is that growing the GDP is
equivalent to promoting the general welfare, but there
is really no evidence that the two are equivalent or
even correlated. -tom
\_ Says Comrade Tom
\_ You have no substance. -tom
\_
,. ^_^ ., <-------- tom
_ .' '. _
/\) (/\
/ / \ \
( Y) (Y )
\_ The point is people buy what they want. Whether they
are happy or not is beside the point. It might be
found that slaves were happier as slaves than free
men.
\_ Actually, whether we are happy is exactly the
point. Would you prefer a large and growing
economy where everyone is unhappy, or a static
economy where everyone is happy? Getting rid
of weekends would do a great job of growing
the economy, but it would not be of societal
benefit. The point is that growth of the
economy is not equivalent to improvement of the
country. -tom
\_ Getting rid of weekends would be a planned
totalitarian move, not a market action.
Would it really grow the economy, I'm not
so sure... people need days off for errands,
shopping, and recreation which generates a lot
of GDP.
Of course it's better if we're happy. Maybe
we should put antidepressant drugs in municipal
water supplies?
You can't make everyone happy though. Which
country is so ideal in this regard?
This country has a highly stressed cultural
fabric. We have many different races and
cultures which contributes to isolation and
lack of unity. This is just the nature of
our nation and has little to do with markets.
Anyway, people seem pretty happy to me.
\_ You know that the "free market" didn't
invent the weekend, right? -tom
\_ Huh? That $800 already exists in the pocket of someone.
Whichever way they spend it is going to put $800 in
the pocket of the shoe company (for sake of argument
let's say the same company makes $800 snakeskin boots
and $20 rubber shoes) which will be used to pay wages and
investors who will then spend the money as they see fit.
It doesn't really matter what they buy with that $800 as
long as they spend it instead of saving it. In fact, since
luxury items have a higher markup you might argue that
luxury items have an environmental benefit because it's
less harm to the environment to make one pair of snakeskin
boots versus 40 pairs of rubber shoes. Same with your
car example. One supercar is better for the environment.
\_ Wealthy people spend money on vehicles that pollute
more. Look at Larry and Sergey. They got 2 Prii
but decided to get a modified 757 instead of
LearJet/CitationX which are more efficient. Also
jets carrying 2-4 people have horrible mileage
compared to automobiles, yet, they choose to fly
frequently. $$$ = more usage = more waste =
more pollution.
\_ side note: it is fucking stupid to pluralize
"prius" as "prii". -tom
\_ Priusen
\_ But shoes have value. If you take a man with no
shoes and give him a pair of cheap shoes he is better
equiped to create wealth. Probably more wealth than
those shoes cost in the first place. Luxury goods,
on the other hand, don't add as much beyond their
purchase price. You know the whole concept that money
makes money? It's not as productive if all that money
is being spent on is luxuries.
That millionaire is going to spend his $$$ on something
and 30 middle-of-the-road vehicle is not as efficient.
He's not going to give the $500K to someone else, which is
an assumption you seem to make. However, the $500K ends up
in the economy in either case where it gets spent on
other goods and services, perhaps on middle-of-the-road
vehicles purchased by the people who made the supercar.
\_ Sure it is, because it ends up in the same place
either way - in the pockets of the people who made
the goods. How does a millionaire buying 40
pairs of $20 shoes contribute more to the
economy than the same millionaire buying one
pair of $800 shoes? It doesn't.
\_ Generally utilitarian items are used more
productivly than luxuries. Are you really this
stupid? Items used friviously have less
benefit to an economy than items used
productivly. Expensive luxuries are much more
likely to be used friviously. And that's a
problem in economies where the wealth is
concentrated among a small portion. Yes,
they will spend money. Yes that money will
go to people who spend money. But most of
the money stays in the small percentage it
will be spent on luxuries it won't be as
beneficial to the economy as a whole creating
less wealth than if the money was being spent
productivly.
\_ Virtually all shoes are luxuries. You can
buy sturdy utilitarian shoes for $10 on
sale or $20 new. People choose fashionable
ones as luxuries. Luxuries make people's
lives happier. This is good: we're not
all working for the glory of the fatherland.
Demand for luxuries creates demand for
productive stuff to make those luxuries and
people jobs. We're far past the point of
struggling for really basic stuff like
a pair of shoes (most of us anyway). It's
all about improving quality of life now.
Wealth concentration is a separate issue
from whether GDP growth in luxuries is
somehow bad for the economy.
Trade imbalances are bad, wealth
concentration is bad. Economic activity good.
\_ You have a hard time with reading
comprehension.
\_ No, this person is apparently
just missing the point..
Hey you! Another, hopefully clearer,
analogy: is $10k of medicine which
keeps a scientist alive, who makes
a key breakthrough that makes
cars 10% more efficient MORE or LESS
"economically beneficial" than some
rich doofus spending $10k on designer
toilet paper? Which is the better
Hey you! Another, hopefully
clearer, analogy: is $10k of
medicine which keeps a scientist
alive, who makes a key breakthrough
that makes cars 10% more efficient
MORE or LESS "economically
beneficial" than some rich doofus
spending $10k on designer toilet
paper? Which is the better
allocation of the $10k resource?
Which benefits society in general
more? Which individual is "happier"?
YES, the $10k is given to someone
either way, and is "recycled", but
the HUMAN EFFORT required to earn
the $10k is WASTED in one case and
BENEFITS SOCIETY in the other.
more? Which individual is
"happier"? YES, the $10k is given
to someone either way, and is
"recycled", but the HUMAN EFFORT
required to earn the $10k is WASTED
in one case and BENEFITS SOCIETY in
the other.
\_ This is fallacious. The $10k is
not either spent on saving a
scientist or someone's luxury.
There are enough resources for
both things to happen. You also
\_ But there are not resources
enough for EVERYTHING to
happen. The key point is
to maximize benefit of
resources expended. $10k
designer toilet paper is
of less benefit than $10k
of beneficial preventative
immunizations, since you
apparently don't like
scientists. Same with
$800 pair of luxury shoes
vs. 40 pair of $20 utility
shoes. The market sometimes
does a very poor job of
maximizing benefit.
\_ The market does a better
job than any other method
can. It's not 100%
efficient, but as close to
it as one can get.
\_ Maybe, or maybe not,
but GDB does not measure
many economic goods with
value, as this article
points out. It is broken.
points out. It is
broken.
\_ Your theory says this.
But the reality is that
the market is better at
optimizing distribution
of some resources and
that community decision
making (democracy) is
better in other cases.
don't know ahead of time whether
medical spending will keep
someone alive or that someone
will do something good. Maybe
scientist will actually go nuts
and SHOOT everyone in his lab
thereby HARMING SOCIETY. And at
the end of the day, what do we
get out of the efficient cars?
Cars are luxuries too. They are
mostly conveniences for people.
Aren't we all supposed to move
to the city and use mass transit?
\_ Look, you don't know what you
talking about and you are
either trolling or stupid.
You also seem to think that
our point is that everyone
should live in a communist
society with no luxuries.
That's not what anyone is
saying. So take off your
blinders and read the whole
thread again or just please
die.
\_ Here we go with ad hominem
SPLUTTERING. Nice job,
fuckface.
Your argument is totally
disingenuous. What you're
really getting at is wealth
equalization, and hinting
at some sort of eugenics-
based resource allocation.
The guy buying ridiculous
luxuries is doing that
because he's an EVIL RICH
BASTARD.
\_ How did you ever pass
the reading comprehension
CAT tests?
\_ Maybe you just don't get it.
What is the point of all the "productive
spending"? what is it all for? at the
top of the food chain is luxury.
You don't even make sense. "most of the
money stays in the small percentage it
will be spent on luxuries" What? speak
English.
\_ 30-40% of growth in healthcare doesn't have to mean we're getting
more sick. It may mean we're just more and more focused on being
healthier.
\_ Or getting ripped off more and more by the insurance companies.
\_ And this is the point of the article: GDP, by itself, with no
analysis of where the money is going, is not itself an indicator
of efficiency or success. A more meaningful figure would include
an analysis of American health, and corruption and inefficiency
in the healthcare industry.
\_ That's a straw man argument. No one claimed GDP growth
measures efficiency, quality of life, or "success" (whatever
that means). However, a larger GDP almost by definition
means a larger economy and a larger economy means, again
almost by definition, more goods and services produced.
Think of it as "economic capacity" or "economic capability".
A larger GDP nation can outproduce a smaller one, whether
all those goods and services go to one individual
(dictatorship), everyone (communism), or are distributed
by the free market (capitalism).
\_ Read the article. The author argues that when the govt.
says that the economy is strong based solely on GDP, that
is a meaningless simplification. Yes, a _significantly_
higher GDP demonstrates the difference between a
modern industrialized nation and a third-world developing
nation. However, if the President says the economy is
strong because GDP has increased half a percent, what does
that mean? Does it mean people paid more money for the
same amount of gas (money that goes directly into the
pockets of the House of Saud)? Does it mean more people
are eating out? Does it mean that it was hotter this
summer so ice cream sales are on the rise? It might mean
any of the above or none at all. At small levels of
difference, it's a meaningless stat.
\_ But it's a straw man argument, because no one is
saying that GDP by itself is so incredibly meaningful.
This is mentioned in Econ 1, as are externalities.
Real GDP versus nominal GDP are also basic concepts.
So this genius author points out something every Econ 1
student learns - that there are limitations and
caveats when measuring economic output and that GDP
(even Real GDP) alone doesn't tell the whole story. BFD.
Even the Wikipedia article on GDP talks about its
limitations. There was nothing interesting or novel
in that article.
\_ Sweet mother of god, this guy is not talking about
people who've taken Econ 101, he's talking about
politicians who wave around a 1-point increase in
GDP as if it's the holy fucking grail.
\_ So you're damning a statistic and centuries of
economics on measuring econ output because Bush
and other policticians are abusing the term?
and other politicians are abusing the term?
\_ Did you read the article?
\_ I don't know if he did, but I did and
it was full of crap like (coming full
circle) the specious argument about $800
shoes somehow contributing less than
40 pairs of $20 shoes. He worries that
"[t]he money in the big pot could be going
to cancer treatments or casinos, violent
video games or usurious credit-card rates."
Yes, it could. So what? It's still economic
output. Somehow "violent video games" are a
lesser form of economic output or something?
It sounds like he wants to characterize
what is "good spending" and what is
not. In fact, he goes so far as to say
that people are not rational with their
expenditures. Presumably they would be
a lot happier if he made their expenditures
for them? He speculates that marriage is a
threat to GDP because there's no divorce
spending? Is he on crack? The money that
isn't spent on divorce will be spent on
something else (or invested). It doesn't
disappear and will be reflected in the
GDP either way as the person who receives it
will then make his own economic decisions.
Economics is not about value judgements.
His article boils down to: "People
don't spend their money the way I think
they should." No wonder Tom likes it.
\_ His point was that touting an increase in
the GDP as some sort of indicator of
the health of the nation is overly
simplistic and meaningless. We're
measuring throughput while ignoring
destination. We don't know if the end
result is investment in our own
economy (yay!) or pools full of diamonds
in Riyadh (boo). He's saying that we
\_ GDP includes an exports minus imports
in the equation. Consumption isn't a
one way street. To pay for diamonds in
Riyadh requires spending money.
need to assess more than just the amount
of money that trades hands. That's not
the same as a "planned economy" a la
Stalin or Mao; it's arming the consumer
with tools for making more informed
choices. His point about divorce was an
obvious exaggeration designed to show
that an activity which increases money
flowing from one set of hands to another
is not necessarily an indicator of a
a healthy economy; it's an indicator of
nothing more than money moving. I don't
see where you see this ominous shadow
of socialism that seems to have you in
a tizzy. I don't see anything anti-
capitalism in wanting to know where the
money's flowing; if anything, I think
it's the basis for the purest capitalism.
\_ Nothing wrong with knowing where
the money is flowing, but what does it
matter? His undertone is that it's not
necessarily flowing where it should
be. He can't make that call. Divorces
make plenty of people happy. Recall
the days before they were common.
I can sell you a service and then you
can sell me one back. It's not
"nothing more than money moving". Two
services were performed.
\_ Do you think that having two
parents working and paying a
nanny to raise the kids is
inherently better for the
country than having one parent
stay home? -tom
\_ No idea and, unlike you, I don't
profess to know. However, if
parents are doing it then they
must feel it benefits them and
their family.
\_ The problem is, because we
are measuring our success
by GDP, we create political,
economic, and social
incentives to make the
choice to outsource
parenting. Prior to Keynes,
families with two working
parents were virtually
unheard of; now they are the
common case. It's
fallacious to consider this
the result of the free
market, except insofar as
free market ideology values
monetary transactions and
thus encourages them. You
get what you measure. -tom
\_ Uh, that's not due to
measuring GDP. Those
incentives exist anyway.
Prior to Keynes women
couldn't even vote in
general and their
economic opportunities
were culturally limited.
How do you propose to
"get the women back in
the kitchen"?
\_ Look, it's simple;
the metric you use to
measure success has
effects on behavior.
This is self-evident.
The primary measure we
have used to measure
success of the country
in the past 60 years
has been GDP. It is
not at all coincidental
that the society we
have built in that time
values consumption,
planned osbolescence,
and outsourcing. Those
are predictable effects
of using GDP to measure
success. The point is,
no one ever bothered to
prove that we'd be
better off with GDP
as our primary success
metric. And it's not
clear that we are. -tom
\_ Dude, you are way out
on a wobbly limb here.
The BEA uses GDP as
a measurement of
economic strength.
You'll have a hard
time proving that
individual purchasing
and business
decisions are
somehow tied to that
measuring stick.
Consumers and
corporations aren't
making decisions
based on how they
affect GDP. GDP
reflects the
decisions. It doesn't
drive them.
\_ The incentives
our society puts
in place are based
on how they affect
GDP. Individual
decisions are
skewed based on
those incentives.
-tom
\_ I assume you are
referring to
interest rates
when you say
incentives?
I think your
position is
untenable.
Rates are
determined
by a lot more
than just GDP
and it's not
clear to what
extent monetary
policy affects
the economy.
(See Japan's 0%
rates and yet
sluggish
economy.)
You are
reaching.
_/
Why would you assume I'm
referring to interest rates?
I'm referring to an enormous
number of decisions around
taxation, subsidy, and policy.
For example, farm subsidies
for factory farms. "Get big
or get out." Subsidy for the
road system, while passenger
rail is starved. Oil
subsidies. The military-
industrial complex. Allowing
obnoxious advertising
virtually everywhere. Christ,
the week after 9/11 there were
press conferences that weren't
about terrorism or security,
they were about "America: Open
For Business!" All these
things are in support of the
idea that more consumption is
better. You can't go through
an election cycle without
hearing virtually every
politician talk about "growing
the economy" and "creating
jobs"; no one even suggests
that growing the economy might
not be the right goal. -tom
\_ Please provide proof that any of
these are tied to a large extent to
the way that GDP is measured. I
mean, seriously, how does the
way GDP is measured lead to the
decision (if it's even true,
which is its own argument) to
subsidize roads versus rail?
How would you change the way
GDP is measured in order to get
the "correct" result?
mean, seriously, how does the way
GDP is measured lead to the decision
(if it's even true, which is its own
discussion) to subsidize roads
versus rail? How would you change
the way GDP is measured in order to
get the "correct" result?
\_ hi dim!
\_ I'm not talking about changing the
way GDP is measured, I'm talking
about changing the way *success*
is measured. Success is measured
in the US by GDP growth, therefore
politicians make decisions which
encourage GDP growth. An
auto-based culture has many more
transactions than a transit-based
culture; its inefficiency
"creates jobs" and therefore is
good if you're measuring success
by GDP. -tom
good if y
good if you measure success by
GDP. -tom
\_ What you are missing, just like
before, is that *if* a
mass-transit-based culture has
fewer transactions and/or
smaller transactions (not
necessarily true) then that
leaves more resources to
spend on other projects,
which makes the GDP pretty
much unchanged as compared
to auto-based. These are not
decisions that affect the size
of GDP. These are distribution
decisions: how do we spend the
GDP that we are capable of
generating.
\_ What *you* are missing is
that GDP is the result of
labor, and that the US
systematically encourages
choices which result in
increased labor. For
example, if someone stays
home with the kids, that
family will have less
income and spend less money.
If someone decides to take
a lower-paying job so he
doesn't have to commute
an hour each way, the family
will have less income.
If someone decides to work
a part-time job because he
really enjoys working in
the garden, and is able
to provide a good percentage
of the food the family
consumes, the family will
have less income. In all
these scenarios, the family
spends less and thus
contributes less to GDP.
It's not a zero-sum game.
Why should Americans work
more hours and have less
vacation than Europeans?
Shouldn't our excees
capacity be used at least
partly to give people more
leisure time? -tom
\_ That's not some official
policy. That's just
economics. Yes, choosing
to work less results in
less output. If you work
a good job you can afford
to have lots of free time
if you want. Maybe our
capacity isn't as excess
as it seems... tons of
people are in debt. Maybe
it's a function of our
banking industry which
idolizes debt. Debt
pushes up money supply
and inflates everything.
We have to go into debt
to compete for resources
against everyone else who
is in debt, working off
their monthly payments.
We're all indentured to
banks.
people are in debt.
Americans don't like to
"do without".
\_ Our use of GDP as a
measure for success
is not merely an
official policy; it
is deeply ingrained
in our culture. The
idea that more is
always better has been
so effectively sold to
us that most Americans
accept the idea as
axiomatic. It's not.
There is no reason
why Americans need
to use 2-3 times more
resources per capita
than Europeans; we
just assume that the
ways we do things are
the best ways, because
that's the way we've
"always" done it. -tom
\_ It's not just us.
Immigrants who come
here lap it up. And
they all use GDP to
measure their econs.
\_ GDP is a decent
measurement of
the size of an
economy. It's
not clear it's
a good
measurement of
the *success*
of an economy.
-tom
\_ You are just wrong about there being
centuries of measuring economic statistics.
This stuff was practically invented by FDR
and his economists. Keynes is considered
the father of Macroeconomics. |
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| harpers.org/archive/2008/06/0082042 Jonathan Rowe From testimony delivered March 12 before the Senate Committee on Commerce, Science, and Transportation, Subcommittee on Interstate Commerce. Rowe is codirector of West Marin Commons, a community-organizing group, in California. Suppose that the head of a federal agency came before this committee and reported with pride that agency employees had burned 10 percent more calories at work last year than they did the year before. What were these employees doing when they burned those calories? Expenditure is a means, not an end, and to assess the health of an agency, or system, you need to know what it has accomplished, not just how much motion it has generated and money it has spent. The point seems obvious, yet Congress ignores it every day when it talks about "the economy." Every time you say that "the economy" is up, or that you want to "stimulate" it, you are urging more expenditure and motion without regard to what that expenditure is and what it might accomplish, and without regard to what it might crowd out or displace in the process. That term "the economy": what it means, in practice, is the Gross Domestic Product-a big statistical pot that includes all the money spent in a given period of time. If the pot is bigger than it was the previous quarter, or year, then you cheer. If it isn't bigger, or bigger enough, then you call Federal Reserve Chairman Ben Bernanke up here and ask him to do some explaining. The what of the economy makes no difference in these councils. The money in the big pot could be going to cancer treatments or casinos, violent video games or usurious credit-card rates. It could go toward the $9 billion or so that Americans spend on gas they burn while they sit in traffic, or the billion plus that goes to such drugs as Ritalin and Prozac that schools are stuffing into kids to keep them quiet in class. The money could be the $20 billion or so that Americans spend on divorce lawyers each year, or the $41 billion on pets, or the $5 billion on identity theft, or the billions more spent to repair property damage caused by environmental pollution. The money in the pot could betoken social and environmental breakdown-misery and distress of all kinds. All you want to know is the total amount, which is the GDP. I am talking about what you mean when you use that term "the economy." Few words induce such a reverential hush in these halls. When you argue that a proposal will help the economy or hurt it, then you have played the ultimate trump card in your polemical deck, bin Laden possibly excepted. To be reflexively against growth is as numb-minded as to be reflexively for it. It is an insanity that is embedded in the political debate and in media reportage, and it leads to fallacy in many directions. We hear, for example, that efforts to address climate change will hurt "the economy." Does that mean that if we clean up the air we will spend less money treating asthma in young kids? The atmosphere is part of the economy, too-the real economy, that is, though not the artificial construct portrayed in the GDP. It does real work, as we would discover quickly if it were to collapse. If we burn more gas, the expenditure gets added to the GDP. But there is no corresponding subtraction for the toll this burning takes on the thermostatic and buffering functions that the atmosphere provides. By the standard of the GDP, the worst families in America are those that actually function as families-that cook their own meals, take walks after dinner, and talk together instead of just farming the kids out to the commercial culture. Cooking at home, talking with kids, walking instead of driving, involve less expenditure of money than do their commercial counterparts. Solid marriages involve less expenditure for counseling and divorce. Thus they are threats to the economy as portrayed in the GDP. By that standard, the best kids are the ones who eat the most junk food and exercise the least, because they will run up the biggest medical bills for obesity and diabetes. This assumption has been guiding our economic policies for the past sixty years at least. Is it surprising that the family structure is shaky, real community is in decline, and children have become petri dishes of market-related dysfunction and disease? The nation conceives of such things as growth and therefore good. It is not accidental that the two major protest movements of recent decades-environmentalist and pro-family-both deal with parts of the real economy that the GDP leaves out and that the commercial culture that embodies the GDP tends to erode. How did we get to this strange pass, where up is down and down is up? How did it happen that the nation's economic hero is a terminal-cancer patient going through a costly divorce? How is it that Congress talks about stimulating "the economy" when much that will actually be stimulated is the destruction of things it says it cares about on other days? How did the notion of economy become so totally uneconomic? British troops had just repressed another uprising there, and the Cromwell government had devised a final solution to put its Irish problem to rest. The government would remove a significant portion of the populace-Catholics in particular-to remote parts of the island. Then it would redistribute their lands to British troops, thus providing compensation to them and establishing an occupational presence for the benefit of the government in London. The task of creating an inventory of the lands went to an army physician by the name of William Petty, a quick study and a man with an eye for the main chance. He classified much land as marginal that actually was quite good. Then he got himself appointed to the panel that made the distributions and bestowed much of that land upon himself. Petty's survey was the first known attempt in Western history to create a total inventory of a nation's wealth. It was not done for the well-being of the Irish people but rather to take their land away from them. It was an instrument of government policy, and this has been true from that time to the present. Governments have sought to catalogue the national wealth for purposes of taxation, confiscation, planning, and mobilization in times of war. They have not designed these catalogues to be measures of national well-being or of quality of life. Yet that is how the national wealth inventories have come to be used, especially the GDP. This part of the story begins with the Great Depression. In the early 1930s, as the United States sank deeper into an economic slough, Congress faced an absence of data to help guide the way out. There were no systematic figures on unemployment or production. President Herbert Hoover had dispatched six employees from the Commerce Department to travel around the country and file reports. These were anecdotal and tended to support Hoover's view that recovery was just around the corner. He believed in "scientific management and planning," and the resolution was to produce a tool to that end. It passed in 1932, and the work fell to one Simon Kuznets, a professor who was working at the National Bureau of Economic Research in New York. Kuznets knew that he was producing a policy tool and not a measure of living standards or well-being. As he put it later in his clinical prose, the goal was to help understand the "relations and relative importance of various parts of the productive system and their responsiveness to various types of stimulae as shown by their changes in the past." But about a year and a half later, Kuznets, with brevity and candor that are rare today, laid out for Congress the limitations of the accounts he had constructed. He took particular pains to tell you why you should not use these accounts the way you-and the press-have come to use them. For one thing, the national accounts leave out a crucial dimension of the economy-the part that exists outside the realm of monetary exchange. This segment includes both the ecosystem and the social system-the life-supporting functions of the oceans and atmosphere, for example, and work within families and communities that is not done for money. So wh... |
| preview.tinyurl.com/bgprg -> www.worldpublicopinion.org/pipa/articles/btglobalizationtradera/154.php?nid=&id=&pnt=154&lb=btgl Questionnaire/Methodology A new poll of 20 countries from around the world finds a striking global consensus that the free market economic system is best, but that governments should also do more to regulate large companies. In all but one country polled, a majority or plurality agreed with the statement that the free enterprise system and free market economy is the best system on which to base the future of the world. Program on International Policy Attitudes (PIPA) of the University of Maryland. Ironically, the country that showed the highest level of support for the free enterprise system was China, with 74% agreeing that it is the best system. Others that were nearly as enthusiastic were the Philippines (73%), the US (71%), and India (70%). France was the one country where most did not agree with this proposition. Only 36% of the French agreed that the free market economy is the best system, while 50% disagreed. Others that only showed plurality support for the proposition were Argentina (42% agree), Russia (43%), and Turkey (47%). At the same time, there is even greater consensus in favor of more government regulation of large companies. Solid majorities in every country favored more regulation of large companies to protect the rights of workers (mean 74%), the rights of consumers (mean 73%), and the environment (mean 75%). Support for more regulation reached at least two-thirds in every country except Russia and Germany, where support was consistently in the mid 50s, and South Korea, where 54% supported greater regulation to protect workers. In Russia, however, 17-18% favored more enforcement of existing regulations to protect workers, consumers and the environment. A majority in 15 of the 20 countries also favored greater government regulation to protect the rights of investors (mean 54%). Broadly, most agreed that The free enterprise system and free market economy work best in society's interests when accompanied by strong government regulations. This view was endorsed by two out of three overall (65%). In 18 countries this was endorsed by a clear majority, with Indonesia (86%), the Philippines (77%), and China (76%) being the most definitive. It was endorsed by a plurality in Poland (47%) and attitudes were divided in South Korea (46% agreed, 43% disagreed). In not a single country did a plurality or majority disagree. gif Steven Kull, director of PIPA, comments: In one sense we are indeed facing what has been called the end of history, in that there is now an extraordinary level of consensus about the best economic system. But this is not the victory of one side of the dialectic. While there is overwhelming support for free markets, there is also near-unanimous rejection of unbridled capitalism, with people around the world overwhelmingly favoring greater government regulation of large companies and more protection of workers and consumers. While there is consensus in support of the vitality of free markets, there are also somewhat ominous signs of concern that the system may not be working as it should. In nearly every country, large majorities agree that Large companies have too much influence over our national government. In several countries people were especially emphatic, with large percentages saying that they strongly agreed with this statementMexico (88% agree, 74% strongly), the United States (85% agree, 59% strongly), and Spain (84% agree, 58% strongly). Only three countries did not overwhelmingly endorse this statement. Nigeria was the one country where a slight majority (51% to 41%) disagreed. China was divided (47% agreed, 44% disagreed) and a more modest majority agreed in Turkey (59%). The survey asked respondents how much they trust a number of institutions to operate in the best interests of our society. gif Global companies operating in their country received the lowest ratings. On average 41% expressed trust, with only 7% saying they had a lot of trust and another 34% saying they had some trust. Just over half said they had not much trust (33%) or no trust at all (19%). Mid-level countries expressed the highest levels of mistrustRussia (70%), Argentina (68%), Brazil (64%), Turkey (61%). Developed countries were also quite mistrustful, especially in EuropeItaly (66%), Germany (62%), France (61%), and Spain (60%). People in other developed countries are also mistrustful but in smaller numbersSouth Korea (55%), US (52%), Canada (50%). People in many developing countries did express trust, especially Nigeria (67%), Kenya (65%), and China (60%). Overall, people in 13 countries were more likely to say that they were mistrustful, five were more likely to express trust and two were divided (Mexico and the Philippines). gif Large national companies received ratings more evenly mixed. On average 49% said that felt a lot of trust (8%) or some trust (41%), while 47% said that they felt not much (32%), or no trust (15%). Here again there was substantial variation between countries. Again, developing countries were the most apt to express trustIndonesia (69%), India (64%), China (63%), Kenya (61%). Mid-level countries were mostly mistrustfulBrazil (63%), Russia (57%), Poland (55%), Argentina (54%)but there were exceptions, with majorities expressing trust in Mexico (58%) and Turkey (54%). In developed countries, trust in national companies was fairly low (though not as low as for global companies), with majorities expressing mistrust in Germany (64%), South Korea (58%), and Spain (56%). But here too there were exceptions, with a majority expressing trust in Canada (59%) and views divided in Britain, the US and Italy. GlobeScan President Doug Miller comments, Its a good news/bad news story. While the string of corporate scandals worldwide has undermined trust in large companies, it has not broken the publics faith in the free enterprise system overall. However, our research reveals formidable public pressure for more regulation of the system. To keep ahead of this regulatory curve, companies will need to increasingly demonstrate that they are operating in societys best interest rather than just their own. The social contract needs to be re-built around the free market. These findings are drawn from the 2005 GlobeScan Report on Issues and Reputation, based on a global public opinion poll with citizens across 20 countries (n=1,000 in most countries), conducted between June and August 2005 by research institutes in each participating country, under the leadership of GlobeScan. Variations by Education and Income In aggregate, agreement that the free market system is best was higher among those with high education (64%) than low education (56%), as well as those with very high income (66%) as compared to those with very low income (59%), but the differences were slight. The view that large companies have too much influence over national governments follows the same pattern. Those with high education were more likely to agree (79%) than those with low education (69%). Contrary to the stereotype that very-high-income people perceive the influence of large companies as serving their interests, those with very high incomes were more likely to agree that such companies have too much influence (77%) than those with very low income (66%). Majority support for greater regulation to protect the rights of workers was a bit higher among those with low education (78%) than with high education (68%), and by those with very low income (80%) over those with very high income (71%), but the differences were strikingly slight. The same pattern obtained for greater regulation to protect the rights of consumers, but the variation was even smaller. Interestingly, the same pattern obtained for greater protection of the rights of investors, with 56% of those with low education favoring more regulation as compared to 50% among those with high education, and 59% of those with very low income as compared to 50% among those with very high income. Though those with higher education and income are more likely to be investors, those with low education and income are more likely to think that investors need government protection. No significant variation... |